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Meeting with President of the Russian Union of Industrialists and Entrepreneurs Alexander Shokhin

February 15, 2016, Novo-Ogaryovo, Moscow Region

The agenda included dialogue between business and the authorities and issues the business community is discussing currently and will examine further at the Russian Union of Industrialists and Entrepreneurs (RSPP) annual congress.

President of the Russian Union of Industrialists and Entrepreneurs Alexander Shokhin: Mr President, let me start by thanking you for our regular meetings. Whenever we meet at the start of the year, I always invite you to the Russian Union of Industrialists and Entrepreneurs’ annual congress. I want to make this invitation now. I hope you will find time in your schedule to come to our congress and meet with leading entrepreneurs, as you have in the past years.

 President of Russia Vladimir Putin: Thank you.

 Alexander Shokhin: The congress is the concluding highlight of the Russian Business Week event we organise. We usually hold a whole series of forums and conferences during this event. This includes the tax forum, the international social forum, the economic conference, and the conference on supervisory and monitoring activity. We will also discuss a report on the state of the business climate at the congress.

 Of course, given the current difficulties, we want to not just discuss the state of the business climate, but also get involved in discussing the anti-crisis programme. As Government officials have already said – and we share this approach – it is important to combine anti-crisis measures and strategic policies, for the medium-term tasks at least.

 This creates particular responsibility for dialogue between the business community and the authorities today. We want not just to be heard, but also to be a part of the work on drafting and implementing the needed proposals.

 In this context, let me take the opportunity to say a few words about some of the issues the business community is discussing right now and will examine at the upcoming congress. In particular, this concerns the system for non-tax payments.

(Mr Shokhin went on to discuss the system in place for non-tax payments, making a few remarks and proposals on behalf of the business community).

 It is essential to come back to a subject we have already discussed together, namely, obligatory membership in regional employers’ associations, and uniting the regional associations under a common national association. This will give a more systemic framework to the responsibility not just of business in general, but to employers in particular. If this happens, the trade unions, as social partners, will find it a more convenient system of industrial relations if they can deal with organised business through employers’ associations.

An open law-making process is important for the business community. (Mr Shokhin went on to set out the business community’s views on this matter).

On the subject of privatisation, we certainly support your view on the criteria for large privatisations. It is very important to give privatisation a social focus. In this respect, we think that organisations such as non-state pension funds could play a leading part, taking part in privatisations under market conditions.

We realise that the market price of many assets is quite low at present, and if some large business organisations take part, those that were involved in earlier privatisations say, this could raise some questions. But if pension funds take part, the fact that prices are not so high at the moment (though it is not so good for the budget’s current problems, of course) could produce excellent results further down the line and give the pension system greater stability.

We proposed a scheme along these lines in 2009, when the last crisis was at its height, but other solutions were found back then. The Reserve Fund was still quite large then. Now, we think that tying privatisation to pension reform strategy would be very effective in terms of its social benefits, and business could take part in such a scheme as the minority partner. At the same time, this could attract foreign sovereign funds, acting through the Russian Direct Investment Fund, say.

It would thus be a multi-layered construction, but it should have the pension system at its core. We think the non-state pension fund could be a very effective instrument not just in 2016, but in the medium-term perspective.

I also wanted to draw to your attention a number of issues concerning our international activity. The Business G20 has started work under the presidency of our Chinese partners, and we have agreed with them to hold a Business G20 regional forum at the St Petersburg International Economic Forum. I want to ask you to include our Business G20 partners among the participants in your traditional meeting with foreign investors and businesspeople.

I have a similar request concerning the Russia-ASEAN summit, which will take place in May this year in Sochi. We are working with the Chamber of Commerce and Industry to prepare the business side of this event, and it would be good if the business delegation could meet with you or with you and the ASEAN countries’ leaders.

We are currently developing our cooperation ties with the Asia-Pacific region and developing cooperation in the Eurasian space. It would be good to have some political schemes in place here to get business more involved in this process too. If this were carried out in Sochi and St Petersburg, it would be to the advantage of Russia’s business community and good for our partners too.

Incidentally, Mr President, I have said in the past about how the business community goes about building ties with foreign countries in a somewhat muddled way at times. We can have several business councils, business cooperation councils, business dialogues, committees, forums of company heads and so on all with one single country.

We did request that the Government include the heads of these bilateral business organisations in the intergovernmental commissions, including at deputy chairman level, and at the same time, we should probably give these bodies a clearer structure and organisation. You are right to point this out, and the Government is right to ask this of us. If such an instruction is issued, we are ready to do this organisational work together with the Foreign Ministry and Economic Development Ministry, and better organise the business groups working in key areas with our foreign partners.

Mr President, I do not want to overload you with the issues that we would like to discuss, including at the congress. I wanted to pass on our letter with the invitation to the congress. I have outlined some of the issues to be addressed. If you think it possible to give the needed instructions to examine these issues so that we could receive the Government’s response, and in some cases, the Presidential Executive Office’s response at the congress, this would make our dialogue effective. In this case, we could do more than just raise questions; we could discuss what has already been agreed.

(Mr Shokhin went on to discuss joint work with the State Duma on drafting a new Administrative Offences Code).

Mr President, I would like to raise several other issues, perhaps of a more private nature. In particular, we drafted a list of charity foundations headed by members of the RSPP’s board. They include personal, private, family and corporate foundations. I think that we ought to encourage entrepreneurs who invest in these sorts of programmes.

We have a decoration, a state decoration, the distinction For a Good Deed. I think it is a very suitable decoration for this kind of purpose. I have made a list of these foundations. I did so not so as to decorate people straight away, and I am not sure that all of the colleagues I included on the list would like to be in the public gaze, but if you think this possible, we could develop this subject.

Vladimir Putin: Mr Shokhin, I think that these are all interesting proposals you have made. We need to take a good close look at them. I know that the Finance Ministry supports your idea about systematising non-tax payments. This requires close attention from the Government and from the business community, too. I hope that you will work together in this area. You already have experience working together on matters of this sort, of interest to the business community. This is the first point.

Second, regarding the law-making process, I agree with you that efforts to humanise the criminal laws and adopt new rules for administrative court proceedings in the future and changes to administrative law should be synchronised, of course, and the situation should not be allowed to worsen. This is something we need to keep under close watch.

Of course, it would certainly be good to have the pension funds take part in the privatisation process, and this could be very beneficial. We would need to make a thorough examination of the issue, but overall, I agree with you that these are long-term investments and the current circumstances are such that could even be to the funds’ advantage as they could enter at a lower price and would have growth prospects ahead. Overall, this is an idea worth looking at.

Finally, one further matter that you have raised a number of times at earlier meetings, namely, how laws are applied in practice and interaction with the law enforcement system. What is the situation here?

Alexander Shokhin: The situation is certainly changing and is gradually improving. As far as supervision and inspections are concerned, including from the law enforcement system, I think we are moving in waves. On the one hand, there has been a gradual reduction in the number of inspections and amount of red tape and so on.

But even as we work on these matters on our agenda, many agencies act in self-preservation and restore some of these functions or take on new functions. Thus rather than a steady, continued decrease in pressure from officials and the law enforcement agencies, we see more of a series of waves. We therefore need to stay vigilant, and we will continue to keep this issue on our agenda.

Apart from a policy of not increasing the tax burden on business at this time of crisis, we think that the main means for achieving the course you set towards greater economic and entrepreneurial freedom is to significantly reduce administrative and law enforcement pressure.

I am not sure how possible it is to raise the question of suspending some laws right now. In principle, we agree, of course, that the law enforcement agencies should be able to open criminal cases for tax crimes, for example. We need to examine the legal practice in this area and if we see that there is a sudden increase in the number of such cases opened but with few results, perhaps some adjustments are needed.

We need to follow closely all of the recent measures. This includes the law on de-offshorisation of foreign-controlled companies (the amendments you approved nearly 18 months ago are being passed now – the process is moving slowly), opening criminal cases for tax crimes, and ongoing reduction of the number of supervision and inspection bodies that can carry out inspections with approval from the prosecutor’s office, while various agencies have been trying to make inspection bodies exempt from this law. We will keep following all of this and we count very much on constant dialogue in this respect.

I am very pleased that you raised this issue. It would be much worse if you said, “How many times can you keep raising this matter?” But we will keep bringing this matter up, because if we don’t, the balance will not be in favour of economic and entrepreneurial freedom.

Vladimir Putin: In that case, I have a proposal. You said you will keep raising this matter. Dialogue with the Government is natural and comprehensible, but dialogue with the law enforcement system is a more complicated matter. Business and law enforcement is a far subtler and more complicated issue.

But this dialogue is nonetheless something we need today, and so I have a proposal to organise just such a dialogue through the Presidential Executive Office between business and the law enforcement sector, not a direct dialogue, but using the Presidential Executive Office as an intermediary. This way, it would not be individual companies, physical individuals or even legal entities that come with complaints and requests, but business associations such as the RSPP, the Chamber of Commerce and Industry, Delovaya Rossia, and OPORA Russia on one side, and ministries and agencies on the other, the Prosecutor General’s Office, Interior Ministry, Federal Security Service and Investigative Committee, say. These agencies could delegate specially appointed people at deputy minister level to meet quarterly, say, with the Presidential Executive Office as the intermediary. They would examine sensitive issues of concern to the law enforcement agencies, which have a duty to protect the interests of society in general, on the one hand, and to the business community, on the other. The aim would be to ensure that the resulting laws and, most importantly, the actual application of these laws once adopted, are in keeping with the state’s overall interests in general.

Alexander Shokhin: This would be a very effective instrument.

Mr President, I think though that we would probably need to have quite regular meetings under your aegis with the heads of the law enforcement and security agencies. I remember that you organised such a meeting a couple of years ago and brought together the law enforcement and security heads, the heads of the higher courts, and business community leaders. We had a very productive conversation about the real obstacles facing business, which problems could be resolved through amendments to the laws, and which through changes to the way laws are enforced in practice.

I think the mechanism you propose would therefore be a good way of preparing meetings of this kind. If problems build up that require the President’s involvement and decisions, it would be possible to turn to you, too. I think that considering the attention you have given this matter, this should be possible.

Vladimir Putin: Let’s work out the mechanism. I could take part at some times, and so could the heads of the relevant law enforcement agencies, and at other times, the Chief of Staff of the Presidential Executive Office could take part, say, along with the deputy heads of the relevant agencies.

Alexander Shokhin: If they know that you can call them all together from time to time and ask questions, perhaps we would not need to turn to you directly.

Vladimir Putin: Perhaps. Let’s work out the mechanism.


February 15, 2016, Novo-Ogaryovo, Moscow Region